Low-end laptops:The rise of the Chromebook

Some people are still in denial about the rise of the Linux operating system with the Chrome Web browser interface, Chrome OS, and its hardware: the Chromebooks. The experts say, however, it's the one segment of the PC market that's growing while everything else shrinks.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

Some Windows experts, such as Paul Thurrott, call Chromebooks a joke. Some industry groups, such as NetMarketShare, claim that they still see essentially no use of Chrome OS. Both need to wake up and smell the Chrome OS coffee. Chromebooks have been selling like hotcakes on a cold morning for  a year now.

Market analysts agree: Chromebooks have taken off in the low-end laptop market while Windows 8.x PCs continue to decline.

Chrome OS, a version of Linux that uses the Chrome Web browser for its main interface, and its main hardware platform, Chromebooks, are actually the one segment of the dying PC market that have actually been growing, according to Stephen Baker, VP of Industry Analysis for Consumer Technology for retail analysis group, NPD Group. "The low-end [computer] market is growing. It's overall positive, everything else is negative," added Baker.

"We expect Chromebooks to continue to have a substantial presence in the entry-level price bands during the holidays," added Baker. "They have consistently accounted for 20-25 percent of the entry-level market for consumer notebooks in 2013 and given the typical consumer (and channel) price sensitivity during the holiday they are very well-positioned to expand that share over the holiday period The significant marketing and advertising support Google is providing its partners is likely to be a key a feature in helping continue to raise awareness of the product and show consumers that it is a reasonably priced alternative to a tablet."

That last point is an important one. Baker sees Chromebooks not just competing with low-end Windows 8.x laptops, but with tablets as well. In particular, NPD sees fighting with Android tablets for marketshare over the holidays.

Before that, Baker said that Chromebooks had sold at an exceptional rate during the back-to-school buying season. This is perhaps one reason why Windows 8's anemic adoption growth rate declined to half of its already usual poor adoption rate in October.

Amazon best seller list was the first to show that Chromebooks were hot with buyers in January when the best-selling laptop was Samsung's ARM-power Chromebook. Ten months later, Amazon's sales list shows Chromebooks are stronger than ever. Four of Amazon's top five selling laptops on November 8th were Chromebooks.

Leading the pack was the Samsung ARM-powered $243 Chromebook again. This was followed by the $279 HP Chromebook 11; the one Windows system, the $459 ASUS Transformer Book T100TA-C1-GR Convertible Touchscreen Laptop; the $249 Acer C720 Chromebook; and its predecessor, the $249 Acer C710 Chromebook. Besides the vendors mentioned above, Lenovo is also selling Chromebooks now.

Rajani Singh, Senior Research Analyst for IDC's quarterly PC Tracker, also has seen Chromebooks gain traction. "In Q3 '13 Chromebooks continued to show some momentum. Right now, adoption in education segment is quite visible, as this segment is very price sensitive and low price points of Chromebook helped in greater adoption. Even retail buyers are also adopting Chromebook. But we need to wait and watch to see if Chromebook volume is resulting from vendor's push or market driven demand. Apart from education and consumer segment, we expect some adoption in small office (mainly) and small biz (some volume) in near future (Q4 '13 and Q1 '14)."

That said, Singh warned, "Chromebooks from any vendor except Samsung have not fared particularly well. Even with Samsung's products, they're primarily only having an impact on K-12 education in the US--as a replacement for aging netbooks. In Q3 '13, Samsung shipped roughly 652,000 Chromebooks Worldwide , of which majority of the shipments (roughly 89 percent) were in the US, recorded at slightly over 577,000 units. Among other vendors Lenovo, Acer and HP have shipped, but in tiny volume. Samsung continues to hold the number one position by shipping majority of Chromebooks inside geographical boundary of the US."

One reason for this, Singh claimed is that, despite Amazon's numbers, "Chromebooks overall are still a tough sell for consumers because there are so few applications available. This is also one of the reasons why, even after such low price points, Chromebook adoption is still slow in non- education segments."

Having said that, Singh concluded, "Chromebook will continue showing momentum, at least in near term, their share will grow but overall they will hold minority share in total notebook space. In longer term, we need to wait and see, if Chromebook demand actually increases or they have same fate as of "netbooks" (strong growth followed by sudden demise). This also depends on vendors, if they are able to come up with upgraded versions of Chromebook that have more features, maintaining the low price points, and some key vendors are working on this."

At the same time, Bob O'Donnell IDC's VP of clients and displays, warns that, "Essentially, the value equation for Chromebooks is the cheapest clamshell form factor notebooks you can buy, but we expect to see some even more aggressive Windows 8-based notebooks that will directly compete with Chromebooks on price and probably represent a better value for most consumers than Chromebooks."

Disgruntled Windows 8.x users might disagree. The market, which saw Windows 7 usage go up in September, seems to have little interest in learning Windows 8. As American Customer Satisfaction Index (ACSI) director David VanAmburg has said, "Microsoft's revamped Windows 8 operating system does not seem to have provided a bounce in sales or in customer satisfaction for these manufacturers."

Say whatever you will about Chromebooks, anyone who's ever used a Web browser can sit down at one and start being productive. The same can't be said of Windows 8.x with its Metro interface. Indeed, Google is working on making it possible to use its Chrome Web browser as a de facto desktop shell for Windows 8.x.

Another problem with low-priced Windows scenario is that Windows overcame the Linux netbooks not because of a new operating system, but by bringing back an old operating system, Windows XP, for next to no cost to vendors. With Microsoft pushing hard to move its own pricey Windows 8.1-powered Surface Pro 2 units a return to this approach seems unlikely.

Research house Gartner also sees good things ahead for Chromebooks. In a report earlier this year, Isabelle Durant, a Principal Analyst in Consumer Technology and Markets, said, that while "The Chromebook standard failed to capture traction at launch, but we are starting to see more interest from consumer, business and education markets. Chromebook vendors like Acer, HP, Lenovo and Samsung should target buyers looking for low-cost, Web-based devices or an alternative to Windows 8." And, indeed, that's just what they've done. 

Last, but not least, forward-looking hardware executives are also seeing further possibilities for Chome OS as a desktop replacement. Jen-Hsun Huang, president and CEO of Nvidia, during the company's third-quarter 2013 earnings call, that while "We have no exposure to Chrome today … it's proven to be quite an important operating system. We have known all along that technologically it is incredibly robust, resilient, and high quality, and now we are seeing quite strong adoptions all over the world. And so this is an area that warrants focus on our part and we will put some energy around it to go see if we can make a contribution in this space as well."

Today, the Chromebook has become a power in low-cost PCs. Tomorrow, we'll have to see, but unless Microsoft is successful in regaining its desktop mojo, it appears that Chromebook and Android tablets will own the low-priced computer user world.

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